Many people are first introduced to estate planning tools when they get their first genuine career position fresh out of school. When you go through orientation you’re probably going to be offered the opportunity to purchase life insurance, and in fact most companies will provide minimal coverage at no expense to their employees.
The most common reason why people include life insurance in their estate plans is because of the fact that it serves as an income replacement vehicle. Ask yourself where your family members would be financially if you were to pass away suddenly and unexpectedly. During our current era most families are structured around the necessity of two incomes, and this is something to take seriously.
Gambling is always risky, but when you are going to be the loser if you do in fact drawn the short straw you have the right to take a chance. But when it is your family members who would suffer if you lose the gamble, it is a different matter entirely.
Life insurance is useful in estate planning beyond its value as a vehicle of asset replacement. To explain, let’s provide an example. Assume you are the owner of a small business and you would consider the value of the business to be the most significant asset that you have. For the purposes of this example let’s say that you have two sons. One of the sons worked side-by-side with you in the business all of his adult life and he understands it inside and out.
The other son chose a different career path, but you definitely want to provide for both of your children equally when you’re planning your estate. You could use life insurance to balance the inheritances by taking out a life insurance policy on yourself that will pay a benefit that is equal to the value of the business that you’ll be leaving to the son that works with you and make your other son the beneficiary.
There are other uses for life insurance as well that are appropriate under certain circumstances. To learn more, simply arrange for a consultation with an experienced estate planning attorney.